Peugeot family wants CEO to go, but Directors Offer Chief Support image

Due to fall in sales, the PSA Peugeot Citroen’s biggest shareholder, the Peugeot family wants Chief Executive Philippe Varin and his management team replaced.

However, the board of French auto maker on Wednesday took the unusual step of publicly backing Chief Executive Philippe Varin.

The public support comes amid signs of private discord. According to a person familiar with the matter, there is growing tension between the board and the unprofitable auto maker’s management over how best to reduce losses in Europe.

“The Peugeot family members have seen their shares losing more than 50 percent of their value, so of course they’re unhappy,” said Horst Schneider, an analyst at HSBC Trinkaus & Burkhardt AG with an “underweight” rating on the shares.

In the aftermath of the 2008 financial crisis, the French government extended multibillion-euro loans to Peugeot and French rival Renault SA (RNA.FR). The loans were conditional on neither company closing French factories. The government also propped up auto sales by offering subsidies for car owners to trade in old vehicles for new, more efficient models.

Things worked very well for one year and a half, with solid sales due to the Peugeot 3008 crossover and Citroen DS models and also thank to government scrappage incentives. But the company’s business began to go down, mainly due to southern Europe.

From January until May, PSA’s sales fell 15% in the EU, and the total market lost 7.7%. The company’s market shares lost 12.1% and shares fell 24%.

The Peugeot family holds a 25.2% stake in the company and 37.9% of voting rights.

Peugeot’s shares rose 6.5% to EUR8.21 Wednesday. But the stock is down 22% so far this year, valuing the company at EUR2.9 billion, making it the smallest company by market capitalization on the Paris bourse’s benchmark CAC-40 index.